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Market Week: July 20, 2015

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Key Dates/Data Releases

7/22: Existing home sales, EIA petroleum status report

7/23: Jobless claims

7/24: PMI manufacturing index flash, new home sales

The Markets (as of market close July 17, 2015)

Following a week of losses, the market rebounded in a big way for the week ended July 17. News of a tentative agreement between Greece and its creditors seemed to quell investor concerns of a Grexit. Moves by the Chinese government have stopped a stretch of sell-offs, temporarily stabilizing the economy. All in all, technology-heavy Nasdaq was the best performer, followed by the S&P 500.

Possibly in response to the presumption that Iran will flood the oil market as a result of relaxed economic sanctions emanating from the nuclear agreement, crude oil was back down near $50 a barrel at $50.89. Conversely, the national average retail regular gasoline price increased to $2.834 per gallon on July 13, 2015, $0.041 above the prior week’s price but $0.801 below a year ago. Gold closed the week at $1,132.30 per ounce–its lowest price in five years.

Market/Index 2014 Close Prior Week As of 7/17 Weekly Change YTD Change
DJIA 17823.07 17760.41 18086.45 1.84% 1.48%
Nasdaq 4736.05 4997.70 5210.14 4.25% 10.01%
S&P 500 2058.90 2076.62 2126.64 2.41% 3.29%
Russell 2000 1204.70 1252.02 1267.09 1.20% 5.18%
Global Dow 2501.66 2512.40 2563.06 2.02% 2.45%
Fed. Funds 0.25% 0.25% 0.25% 0% 0%
10-year Treasuries 2.17% 2.39% 2.34% -5 bps 17 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • The drama that is Greece once again dominated the news this past week. Eurozone leaders and Greek Prime Minister Alexis Tsipras hammered out a rescue deal “in principle” that could provide an additional 86 billion euros in new loans to the economically distressed country. The Greek Parliament approved austerity measures (which include significant tax increases and spending cuts) demanded by creditors as a condition of the deal. With Greece’s approval, many eurozone countries must seek approval from their respective legislative authorities before formal negotiations on the specifics of a new agreement can begin. In the meantime, the European Commission has proposed giving Greece 7 billion euros in emergency loans that would enable the country to make a 4.2 billion euro loan payment owed to the European Central Bank by Monday the 20th.
  • Federal Reserve Chair Janet Yellen maintained the position that the U.S. economy was improving to the point of raising short-term interest rates sometime this year. According to text from a prepared speech given prior to her semiannual testimony before Congress, Yellen stated, “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal-funds rate target, thereby beginning to normalize the stance of monetary policy.” Generally, the Fed is looking for continued labor market improvement and inflation approaching 2.0% as indications that the time is right to raise interest rates.
  • The U.S. Treasury report for June revealed a surplus of $51.8 billion. The fiscal year-to-date (October through June) deficit stands at $313.4 billion. Compared to the first nine months of the government’s 2014 fiscal year, total receipts for 2015 are up 8.3% as is total spending, which is ahead 5.1%.
  • The U.S. Census Bureau reported that the seasonally adjusted estimates for U.S. retail and food services sales for June decreased 0.3% from the previous month, coming in at $442.0 billion. The June estimate, coupled with the downward revision of May’s retail sales from 1.2% to 1.0%, reveals that second quarter consumer spending is weaker than previously estimated.
  • An indication that inflation may not be trending upward, both import (-0.1%) and export (-0.2%) prices fell in June from a month earlier, according to the U.S. Bureau of Labor Statistics. The continuing strength of the dollar plus weak overseas demand helped keep inflation from heading toward the Federal Reserve’s target of 2% before considering an interest rate hike.
  • On the other hand, producers in June received slightly higher prices for their goods and services. The Bureau of Labor Statistics Producer Price Index measures the average change over time in the prices received by domestic sellers of goods and services. The price index for goods and services rose a seasonally adjusted 0.4% in June, following an increase of 0.5% in May.
  • The U.S. Census Bureau’s May report for business inventories and sales showed trade sales and shipments were up 0.4% compared to April, while manufacturers’ inventories also increased by a seasonally adjusted 0.3%. The ratio of inventories to sales stood at 1.36–unchanged from the previous month. Rising inventories may be an indication that businesses are optimistic about future sales.
  • Industrial production has been consistently weak this year, but June did show some improvement according to the Federal Reserve’s industrial production report. Production increased 0.3% in June, but that followed two prior months of contraction, resulting in the annual rate of production for the second quarter of 2015 coming in at -1.4%.
  • According to the Department of Labor, in the week ended July 11, the advance figure for seasonally adjusted initial claims for unemployment insurance was 281,000, a decrease of 15,000 from the previous week’s revised level. The advance number for seasonally adjusted continuing claims for unemployment insurance during the week ended July 4 was 2,215,000, a decrease of 112,000 from the previous week’s revised level.
  • The housing market continues to be a fairly consistent sector. The National Association of Home Builders Housing Market Index, which provides a gauge of housing demand, came in at 60 for July, unchanged from the prior month and the strongest reading since 2005. The demand for new housing also increased, as the U.S. Census Bureau reported that housing starts for June rose 9.8% over May.
  • Consumer prices are beginning to inch higher as the Consumer Price Index rose 0.3% in June from a month earlier, according to the Bureau of Labor Statistics. Over the last 12 months, the unadjusted price index for all items increased by 0.1%–the first annual increase since December.
  • Reflective of the potential impact made by Greece’s debt crisis and China’s economic slowdown, the University of Michigan Consumer Sentiment Index wasn’t able to hold on to its June gains, dropping from 96.1 to 93.3 in July. However, on a brighter note, more buyers referenced higher incomes, suggesting consumer fundamentals have continued to improve.

Eye on the Week Ahead

Housing reports are front and center next week as both existing home sales and new home sales reports come out. Negotiations between Greece and its creditors should continue. Will funds be floated to Greece in the short term, enabling the country to make its next loan payment?

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

 


  
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